Pan American Silver Posts Q3 Loss, Misses on Revenues - Analyst Blog

Pan American Silver Corp. ( PAAS ) posted a net loss of $20.2 million or 13 cents per share on a reported basis in the third quarter of 2014, compared to net earnings of $14.2 million or 9 cents a share recorded in the year-ago quarter.

The loss is attributable to negative non-cash adjustment of $15.4 million on the value of inventories at the Dolores and Manantial Espejo mines, weak pricing and foreign exchange loss.

Pan American Silver reported adjusted (excluding one-time items) loss of $14.3 million or 9 cents per share in the reported quarter, compared with adjusted earnings of $12.2 million or 8 cents per share in the year-ago quarter. Analysts polled by Zacks were expecting earnings of 4 cents per share on an average for the quarter.

Revenues decreased 16% year over year to $178.3 million in the reported quarter. Revenues also missed the Zacks Consensus Estimate of $194 million. The decline in revenues is attributable to lower quantities of metals sold by the company, lower prices of silver, gold and copper sold during the quarter and negative price adjustments.

Pricing, Production and Cost

Average realized silver and gold prices declined 8.3% and 2.7% year over year, to $18.82 per ounces of silver and $1,284 per ounces of gold, respectively, in the reported quarter. Silver and gold contributed 56% and 25%, respectively, to consolidated revenues.

Pan American Silver produced 6.19 million ounces of silver in the reported quarter, down 8% year over year. The decrease was attributable to a fall in production at Alamo Dorado, a two-week work stoppage at San Vicente and heavy rains at Dolores leach station, partly offset by a gain in production at La Colorada, Huaron and Manantial Espejo.

Pan American Silver produced a record 34,100 ounces of gold in the third quarter, a decline of 18% year over year. The decrease was primarily due to a 29% fall in gold ounces produced at Dolores due to heavy rains and 21% fewer ounces produced at Alamo Dorado owing to lower grades and recoveries.

Zinc and lead production were in line with that of the same quarter of 2013, and copper production increased 60% to 2,400 tons due to higher grades from Peruvian operations.

Production costs per ounce of silver increased 4.2% year over year to $17.55 from $16.85 recorded in the year-ago quarter. Consolidated cash costs increased 18.2% year over year to $12.29 per ounce of silver (net of by-product credits). All-in sustaining costs per silver ounce sold also rose 26% year over year to $20.50 in the reported quarter.

Financial Overview

Cash and short-term investments decreased 10.3% to $377.5 million as of Sep 30, 2014 from $421 million as of Sep 30, 2013. Total debt stood at $57.3 million as of Sep 30, 2014.

Developmental Projects

Pan American Silver invested $10.4 million on the La Colorada expansion project year-to-date. During the third quarter, the company focused on activities to prepare the shaft location and determine costs estimates for shaft sinking and infrastructure work for the future. Moreover, the company spent $18.7 million so far this year on Dolores' projects.


Pan American Silver's year-to-date consolidated production of 19.4 million ounces of silver and 117,600 ounces of gold remains within the company's forecast for the first three quarters. The company also believes that it will achieve its annual production guidance of 25.75 million to 26.75 million ounces of silver and 155,000 to 165,000 ounces of gold.

Through Sep 2014, consolidated all-in sustaining costs per silver ounce sold ("AISCSOS") were above the guidance while consolidated cash costs were below its projection for the full year. The company is confident of achieving its guidance for 2014 AISCSOS of $17-$18. Full-year consolidated cash costs are expected to be at the lower end of guidance of $11.70 to $12.70 per ounce.

Pan American Silver's year-to-date sustaining capital of $75.6 million was within the forecasted full-year guidance of $95.5 million. Total project spending in 2014 will be around $50 million, which is $17 million less than the previous estimate.

Pan American Silver currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the mining space include Solitario Exploration & Royalty Corp. ( XPL ), MAG Silver Corp. ( MVG ), and Lake Shore Gold Corp. ( LSG ). While Solitario Exploration sports a Zacks Rank #1 (Strong Buy), both MAG Silver and Lake Shore Gold carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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